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So let us curious traders know what you brokers sell as calls to the unsuspecting
public???
Gwenn
Paul Brittian a écrit:
> A good rule of ultimate survival in selling options is: 1 Never sell
> naked energy calls. 2 Never sell naked S&P puts and 3 Never sell naked
> siver calls. I know that there have been numerous times that going
> against these recommendations would have turned you a profit, however in
> other instances you would have lost the farm. Option selling is indeed
> the choice of many proffessional traders, but what most people don't
> realize is that the options the proffessionals sell are the ones most
> people buy.
> Paul B
>
> Wayne Moody wrote:
> >
> > Stuart Hazlewood wrote:
> >
> > >The real news is that, according to Anand, this range has held true
> > >historically 90% of the time. He therefore recommends strategies that
> > >are short at 1 sigma based on the at the money IV.
> >
> > My comments basically address the strategy of holding short option positions
> > to expiration. I realize that Stuart is considering more sophisticated
> > strategies with adjustments along the way. My main concern is the danger of
> > trading based on statistical results at expiration, without understanding what
> > a nervous ride it can be. The psychology is different when you're betting that
> > an unlikely event won't happen.
> >
> > Richard correctly pointed out that maximum price excursion before expiration
> > is more important than price at expiration. The method may be profitable, and
> > the 90% figure may be accurate, but can the trader survive the experience?
> >
> > Imagine being short for 30 days in a trade that goes well until expiration
> > week, when it reverses and threatens to become unprofitable, and is right
> > on the line with 1 hour left to trade. This will happen. How will you feel
> > if you hold and it fails right at the end? How will you feel if you exit
> > to be safe, and it would have worked out OK? (30 days down the drain)
> >
> > The 30 day statistical trade can turn into a one-hour crapshoot.
> >
> > Some of your 90% winners will be easy, when the market never approaches
> > the danger zone, and premium erodes steadily. You will sometimes be able
> > to close at 1/16 or 1/8 long before expiration. Other times, the index
> > will be close enough to the danger zone that premium will not erode
> > until the bitter end in the last days or hours. As time runs out,
> > a sudden move against you becomes more and more expensive.
> >
> > A successful trade on the long side carries with it a sense of relief
> > because if your option goes from 2 to 3 right away, you can normally
> > make sure it won't be a loser. When you're short with the intention of
> > waiting until expiration, initial success means nothing.
> >
> > Psychologically, for the entire length of the trade, you're hoping that
> > something will not happen, but you know it will happen 10% of the time.
> > The S&P usually does not explode upward, but it possibly might, and
> > you have to live with that fear. You could short a naked call at 2,
> > watch it rise to 10 before the index threatens your limit, and then
> > watch it open the next day at 20. (You don't cover at 10 because the
> > market is still within normal parameters. Without some bail-out point
> > you don't even cover at 20, or 50, or 100. If you DO have a bail-out
> > point somewhere, it is based on price excursion before expiration
> > and therefore you cannot expect 90% success, since 90% is based on
> > holding to expiration no matter what.)
> >
> > The guy on the other side of your trade has a maximum risk of $200 and
> > unlimited upside potential. When the call is at 10, his fear is losing
> > some of his profit, or missing out on further gains. Your fear is
> > unlimited loss and ruin. Who will be more prone to error, and which
> > decision has greater consequence?
> >
> > Wayne Moody
> > wlm95@xxxxxxxxxx
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